CHIEN NGAN SANG v. LAI KAM HING & ANOTHER

HCA 20930/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 20930 OF 1998

____________

____________

_______________

J U D G M E N T

_______________

1. By an agreement dated 15 October 1997 ["the Agreement"] the Plaintiff, as vendor, agreed to sell to the Defendants, as joint purchasers, the property known as Flat 6 on the 6th Floor of Block C, Hilton Plaza, Nos. 3 - 9, Sha Tin Street, Sha Tin, New Territories ["the Property"] at the price of $2,650,000.00. That agreement was the formal sale and purchase agreement entered into by the parties pursuant to a provisional sale and purchase agreement dated 28 September 1997. A sum of $100,000.00 was paid by the Defendants on 28 September 1997 as initial deposit and a further sum of $165,000.00 was paid upon the signing of the formal sale and purchase agreement. Hence the total amount of the deposit paid was $265,000.00 which was 10% of the purchase price.

2. Clause 4 of the formal agreement provided that completion of the transaction should take place on or before 31 March 1998 and clause 6 provided that time would in every respect be of the essence. Clause 13 reads as follows:

"If the purchaser shall fail (other than by the default of the Vendor) to complete the sale and purchase in accordance with the terms and conditions of this agreement the Vendor may forthwith determine this Agreement by giving notice of termination in writing to the Purchaser or its solicitors to such effect and the deposit money paid shall be absolutely forfeited to the Vendor who may (without being obliged to tender an Assignment to the Purchaser) rescind this Agreement and either retain the Property or any part or parts thereof or resell the same, either as a whole or in lots, and either by public auction or by private contract, or partly by the one and partly by the other, and subject to such conditions and stipulations as to title or otherwise as the vendor may think fit. Any deficiency in price arising from such resale and all expenses attending the same or any attempted resale shall be made good and paid by the Purchaser as and for liquidated damages, and any increase in price realized by any such resale shall belong to the vendor. This clause shall not preclude or be deemed to preclude the Vendor from taking other steps or remedies to enforce the Vendor's rights hereunder or otherwise. On the exercise of the Vendor's right of rescission hereunder the Vendor shall have the right, if this Agreement shall have been registered in the relevant Land Registry to register at the said Land Registry as instrument signed by the Vendor alone to rescind the sale of the Property and to vacate the registration of this Agreement. This clause shall not prevent the Vendor from recovering, in addition to liquidated damages, damages representing interest paid or lost by him by reason of the Purchaser's failure."

3. The Defendants did not complete on 31 March 1998. On 26 March 1998, Messrs.Day & Chan (solicitors for the Plaintiff) wrote to Messrs.C.K. Mok & Co. (solicitors for the Defendants) asking for a draft Assignment for approval to facilitate completion. On 30 March 1998, Messrs.C.K. Mok & Co. replied that they had no further instructions to deal with the matter and returned all relevant title deeds. The Defendants did not appoint any solicitors to act for them and did not pay the balance of the purchase price on 31March 1998.

4. By a letter dated 21 April 1998 from Messrs Day & Chan, the Plaintiff accepted the repudiation by the Defendants and exercised his right under Clause 13 of the Agreement and forfeited the deposit in the total sum of $265,000.00. On 29 May 1998, the Plaintiff executed a memorandum pursuant to Clause 13. The said memorandum of rescission was registered in the Sha Tin New Territories Land Registry by Memorial No. 1039221 on 6 July 1998.

5. On 23 June 1998, the Plaintiff entered into a provisional agreement with Chau Ping and Chung Li Yin to sell the Property to them at the price of $1,650,000.00 ["the Resale"]. Formal agreement was signed on 7 July 1998 and the Resale was duly completed on 3 August 1998.

6. On 8 December 1998, the Plaintiff commenced the present action and claimed the sum of $755,260 as damages. The action was settled as between the Plaintiff and the 1st Defendant by a Consent Order of 5 January 2001. A sum of $280,000 was paid by the 1st Defendant to the Plaintiff. The trial before me only concerns the liability of the 2nd Defendant. At the trial, counsel for the Plaintiff Mr Peter Wong indicated to me that the Plaintiff would give credit to the 2nd Defendant for the said sum of $280,000. The claim of the Plaintiff against the 2nd Defendant therefore becomes $475,260, particulars of which were as follows,

(a) Sale price	$2,650,000.00
ADD
(b) legal costs (for the aborted sale)	$3,760.00
(c) commission for the resale	$16,500.00
LESS
(d) price of Resale	$1,650,000.00
(e) deposit forfeited	$265,000.00
(f) settlement sum from 1st Defendant	$280,000.00
	_______________
BALANCE	$475,260.00

7. At the trial of this action, the Plaintiff and his niece (who handled the sale to the Defendants through agent) gave evidence before me. Although the 2nd Defendant was absent, I have tested their evidence as I would have done even if the 2nd Defendant was present in the light of the fact that he was acting in person. I am satisfied that they were truthful in their evidence and reliable.

8. The Plaintiff produced a receipt from Ricacorp Properties Limited dated 23 June 1998 to show that in respect of the Resale, a commission of $16,500.00 was paid by the Plaintiff. With regard to the legal cost for the aborted transaction, a bill issued by Messrs Day & Chan, solicitors who acted for the Plaintiff in the conveyancing transaction was produced to show that a sum of $3,760.00 was paid by the Plaintiff to the said solicitors.

9. In the Defence and Counterclaim of the 2nd Defendant filed on 27 January 1999, three points were put forwarded.

(a) wrongful neglect and/or refusal of the Plaintiff to allow inspection by surveyor appointed by banker of the Defendants;

(b) failure to mitigate on the part of the Plaintiff;

(c) if liable, the 2nd Defendant was only liable for half of the claim.

10. It should be noted that the burden of proof on the matters set out in Paragraph 9(a) and (b) above falls squarely on the 2nd Defendant. Despite the direction of Master Lung made on 3 April 2000 that parties do file and serve witness statements within 42 days, no witness statement has been filed by the 2nd Defendant. Nor did he file any List of Documents as directed by Master Lung. He did not attend the trial to give evidence or to call any witness. In the absence of any evidence adduced by the 2nd Defendant, he could not discharge the burden of proof placed on him.

11. Further, on the first line of defence, viz. regarding inspection of the Property, I have the evidence of the Plaintiff and his niece. The effect of their evidence is that they did not refuse nor neglect to allow inspection. The niece of the Plaintiff was residing at the Property until January 1998. She had given her home telephone as well as mobile phone numbers to the agent. She told the agent that inspection could take place upon reasonable arrangement. However, she had not been contacted at all about inspection. After she moved out of the Property, her home telephone and mobile phone number remained the same. Still no-one contacted her for inspection. As I have said, I find her to be a reliable witness and I accept her evidence.

12. I also note that throughout the transaction, there was no complaint by the solicitors for the Defendants complaining about Plaintiff not giving them or any surveyor a chance to inspect the Property. There is absolutely no merit in this defence.

13. With regard to the defence of failure to mitigate, as I said the 2nd Defendant has not adduced any evidence. The Resale took place within three months after the acceptance of the repudiation by the Plaintiff on 21 April 1998. It is commonly known that the property market was in turmoil after the financial crisis in October 1997. Against such background, in the absence of any evidence from the 2nd Defendant, I hold that a resale within 3 months was reasonable and I am not satisfied that the Plaintiff has failed to mitigate his loss.

14. With regard to the third point, viz. limitation of liability of the 2nd Defendant to half share, in my judgment that is clearly wrong. Whether it is joint liability or joint and several liability, both Defendants are liable to the Plaintiff for the whole claim (see Chitty on Contracts, 28th Edn., Paras.18-002 and 18-003). No matter how one looks at it, the promise given by the Defendants under the Agreement cannot be a several promise, viz. each defendant is only liable for half of the obligations fall upon the purchasers.

15. Clause 34(a) of the Agreement provided,

"the expression ..."the Purchaser" wherever used shall ... in the case of person holding as tenants in common include the persons specifically named and any of them and their respective executors administrators and assigns ..."

Part II of the First Schedule to the Agreement showed that the Defendants purchased the Property as tenants in common. Mr.Wong, counsel for the Plaintiff, relied on these to submit that the promise by the Defendants under the Agreement was joint and several. That submission is however inconsistent with the decision of the House of Lords in White v. Tyndall (1888) 13 App Cas 263. In that case, the House of Lords held that notwithstanding that the property was sold to two purchasers as tenants in common with reference made to their executors, administrators or assigns in the habendum, the obligation under the agreement was joint instead of joint and several. As far as I am aware, this is still good law and this case is still being cited in modern textbooks, see Chitty on Contracts, 28th Edn., p.948 n.16; Trietel, the Law of Contract, 10th Edn., p.527 n.8. It has also been applied in Johnson v. Davies [1999] Ch 117 at 127E.

16. But in the present context, it matters not whether the promise was joint or joint and several. The only material distinctions between the two under the common law are,

(a) in case of death of one of the co-contractors : if it is joint promise, the obligation of the deceased contractor ceased and would not be passed to his personal representative, unlike the case of joint and several promise (see Chitty, Paras.18-012 and 18-013);

(b) in case of judgment against one of the co-contractors : that would be a bar to claim against the other co-contractor if liability is joint but not if liability is joint and several (see Chitty, Paras.18-015 and 18-016);

In case of full settlement with one of the co-contractors: that may discharge the other co-contractor whether liability is joint or joint and several (Chitty, Para.18-017; Deanplan Ltd. v. Mahmoud [1993] Ch 151; Johnson v. Davies [1999] Ch 117; Heaton v. AXA Equity & Law [2001] Ch 173). The latest position was set out by Chadwick LJ in Paras.60 and 63 of his judgment in Heaton. It is basically a question of construction of the settlement agreement.

17. Point (a) does not arise on the facts of the present case. As to (b) and the issue of settlement, the position in Hong Kong has been changed by legislation. Section 5 of the Civil Liability (Contribution) Ordinance, Cap.377 removes the bar to action against a person jointly liable even if judgment has been entered against the other joint obligor. Section 7 (which apparently has no equivalent in England) removes such bar in case of settlement with one joint obligor unless the settlement provided otherwise. Although there has been a settlement between the Plaintiff and the 1st Defendant, the terms of settlement annexed to the Tomlin order of 5 January 2001 clearly showed that it was only a settlement with the 1st Defendant and there was nothing there to suggest that the Plaintiff also released the liability of the 2nd Defendant. Hence, on the facts of our case, the 2nd Defendant remains liable to the Plaintiff for the whole of the claim subject to credit being given to him in respect of monies received by the Plaintiff from the 1st Defendant by way of settlement.

18. On the whole, I am satisfied that the 2nd Defendant is liable to the Plaintiff and that the various heads of damages claimed by the Plaintiff are either the natural and probable consequence of the breach of the 2nd Defendant or within the reasonable contemplation of the 2nd Defendant at the time of the Agreement. I therefore hold that the Plaintiff is entitled to damages in the sum of $475,260.00 as particularised in Paragraph 6 above. I also dismiss the Counterclaim.

19. The Plaintiffs also asked for interest on damages from 3 August 1998 (the date when the damages were liquidated by completion of the Resale) at prime plus 2%. For the sake of simplicity, I would allow interest at 8% per annum for the period as requested. So there will be judgment for the Plaintiff in the sum of $475,260.00 with interest thereon from 3 August 1998 at the rate of 8% per annum to date of judgment and thereafter at judgment rate. The Plaintiff is entitled to the costs of this action from the 2nd Defendant. However, since by reason of the settlement with the 1st Defendant, the claim was reduced from $755,260 to $475,260 and as such fell within the jurisdiction of the District Court, the Plaintiff should not be entitled to costs on High Court scale after 5th January 2001. I order that such costs to be taxed if not agreed, for costs incurred prior to 5th January 2001, it would be on High Court Scale, whilst for costs afterwards, they would be on District Court Scale. As usual, the costs order is an order nisi.

20. After the trial has been concluded but before the delivery of my judgment, the 2nd Defendant applied on 19 November 2001 for the case to be re-opened. The application was heard by me on 4 January 2002. That application was opposed by the Plaintiff. I dismissed that application for reasons given orally which I shall repeat hereinbelow. I was referred by Mr.Hylas Chung, who appeared for the Plaintiff at the hearing of 4 January 2002 to the propositions laid down by Leggatt LJ in Shocked v. Goldschmidt (1994) The Times, November 4 cited in Para.35/2/1 of Hong Kong Civil Procedure 2002. Those propositions were enunciated in the context of an application to set aside a judgment after trial in the absence of a party. The present case does not fall into the same category because I have not yet delivered my judgment. It is however a matter of discretion whether I should allow the case to be re-opened.

21. In my judgment, the following are relevant factors which I should take into account in the exercise of my discretion,

(a) Reason for the failure of the 2nd Defendant to attend trial: although the 2nd Defendant claimed that he failed to attend trial because of illness and admission to hospital, the medical certificate exhibited by him did not specify the nature of the illness and his affirmation did not contain cogent evidence as to the same. I am not satisfied on such evidence that the 2nd Defendant did not attend trial solely because of his illness.

(b) the strength and merits of the 2nd Defendant's case and the prejudice suffered by him as a result of his absence: up to 4 January 2002, the 2nd Defendant did not file any witness statements nor documents pursuant to the direction of Master Lung. He indicated to Yeung J at the Checklist hearing of 20 December 2000 that he did not intend to call any expert evidence. He did not do anything to prepare for the trial notwithstanding that the trial date of 12 November 2001 was known to him. Even if he were present at the trial, he would not be in a position to adduce any evidence to support his own case. The most he could have done was to cross-examine the Plaintiff's witnesses. As I said, I have questioned those witnesses in the light of the Defence and the interest of the 2nd Defendant has been duly protected. Further, as analysed in the earlier part of this judgment, the defence case has no merit. It is also unlikely that I would grant him any adjournment if he did attend the trial on 12 November 2001. I see no reason why he should be in a better position by virtue of his absence.

(c) the manner in which the 2nd Defendant conducted his case in the past : as I said, he did nothing to prepare for the trial. At the hearing of 4 January 2002, he explained that this was due to his eviction from his correspondence address and hence his lack of notice about certain steps in the action. However, on further questioning by me, he admitted that the eviction took place in 2001. The direction of Master Lung was made in April 2000 and the 2nd Defendant attended the Checklist hearing in person before Yeung J. I do not think the 2nd Defendant has any reasonable excuse for his non-compliance with the directions of Master Lung. It is important that the court should not allow litigant in person to escape lightly from the consequence of his own failure to comply with directions of the court given for the purpose of case management. Otherwise, the due administration of justice could be disrupted and injustice would be caused to the other litigants. It is incumbent on every litigant, whether acting in person or represented by lawyers, to get ready for trial and to comply with directions of the court.

(d) The possible prejudice to the Plaintiff if the case is re-opened: the 2nd Defendant told me that he was unable to pay for the costs thrown away incurred by the Plaintiff. It is thus likely that if the case is re-opened and further costs is incurred, the Plaintiff would face difficulties in recovering the same even if he is successful in his claim at the end of the day. Further, further delay could cause prejudice to the Plaintiff in terms of the enforcement of the judgment which could not be compensated by a cost order.

(e) Public interest in the efficient administration of justice: in general, a case should not be re-opened after its conclusion. There must be good and cogent reasons to justify a departure from this.

22. For all these reasons, I am not satisfied that this is a proper case where I should allow the 2nd Defendant to re-open the case notwithstanding his absence on 12 November 2001. I therefore dismiss his application. I have also ordered that the costs of his application to re-open the case be part of the costs of the trial.